Avanir restructures, ends big pharma deals

ALISO VIEJO, Calif.—As it announces work on a restructuring plan, Avanir Pharmaceuticals is also announcing that it is ending relationships with two big pharma companies, AstraZeneca and Novartis—a direction that runs counter to what many perceive as the path to success for small- and mid-size biotech companies. But Avanir doesn't seem ready to throw in the towel just yet.

"We are working aggressively to solidify our financial position in order to fund the company's ongoing operations," says Keith Katkin, Avanir's president and CEO. "We are evaluating several strategic options simultaneously and no option is being ruled out at this time. Our goal is to minimize shareholder dilution and obtain sufficient cash to fund all, or substantially all, of the operating expenses for the next two years, including the estimated costs of the confirmatory Phase III trial for Zenvia."

He also noted that Avanir is in discussions with "several parties" that have expressed interest in acquiring certain Avanir assets, including FazaClo, an orally-disintegrating formulation of clozapine for the management of severely ill schizophrenic patients who fail to respond adequately to standard schizophrenic drug treatments. Some of these parties have also expressed interest in various of Avanir's investigational compounds. All such discussions are ongoing, with no definitive terms having been reached for any of the transactions.

In the meantime, with the cessation of two big pharma research collaborations at roughly the same time, Avanir will work to reduce ongoing operational costs and account for the loss of revenue associated with the two research collaborations. As part of this, Katkin says it is likely that the company will leave its San Diego research facility later this year and move critical clinical development and support resources to the company's Orange County, Calif. headquarters, though he emphasizes no final plans are in place yet. With such measures, the company hopes to reduce its annual operating expenses to $20 million.

The termination of the deal between Avanir and AstraZeneca was "mutually agreed to," says Katkin, and was based on efficacy results for the lead compound, which was being developed to enhance the reverse cholesterol transport mechanism. The desire to reduce operating expenses associated with research and development support functions in San Diego also played a role in the decision to sever the nearly two-year-old relationship, Katkin notes. Following the termination of this agreement, the rights to the licensed compounds will revert back to Avanir, but according to Katkin, "there are no plans to continue with the development of the licensed compounds."

The research arrangement with Novartis reportedly expired pursuant to the normal terms of that agreement, and further research and development work on the macrophage migratory inhibitor (MIF) compounds licensed to Novartis under that deal will be undertaken by Novartis going forward. Avanir and Novartis had been involved in a two-year research collaboration to identify orally active, small molecule inhibitors of MIF for the treatment of inflammatory diseases.